Travelers 2009 Annual Report Download - page 252

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
against TPC based on similar allegations. Notwithstanding the injunction, additional common law
claims were filed against TPC.
In November 2003, the parties reached a settlement of the Statutory and Hawaii Actions. This
settlement includes a lump-sum payment of up to $412 million by TPC, subject to a number of
significant contingencies. In May 2004, the parties reached a settlement resolving substantially all
pending and similar future Common Law Claims against TPC. This settlement requires a payment of
up to $90 million by TPC, subject to a number of significant contingencies. Among the contingencies
for each of these settlements is a final order of the bankruptcy court clarifying that all of these claims,
and similar future asbestos-related claims against TPC, are barred by prior orders entered by the
bankruptcy court (‘‘the 1986 Orders’’).
On August 17, 2004, the bankruptcy court entered an order approving the settlements and
clarifying that the 1986 Orders barred the pending Statutory and Hawaii Actions and substantially all
Common Law Claims pending against TPC (‘‘the Clarifying Order’’). The Clarifying Order also applies
to similar direct action claims that may be filed in the future.
On March 29, 2006, the U.S. District Court for the Southern District of New York substantially
affirmed the Clarifying Order while vacating that portion of the order that required all future direct
actions against TPC to first be approved by the bankruptcy court before proceeding in state or federal
court.
Various parties appealed the district court’s March 29, 2006 ruling to the U.S. Court of Appeals
for the Second Circuit. On February 15, 2008, the Second Circuit issued an opinion vacating on
jurisdictional grounds the District Court’s approval of the Clarifying Order. On February 29, 2008, TPC
and certain other parties to the appeals filed petitions for rehearing and/or rehearing en banc,
requesting reinstatement of the district court’s judgment, which were denied. TPC and certain other
parties filed Petitions for Writ of Certiorari in the United States Supreme Court seeking review of the
Second Circuit’s decision, and on December 12, 2008, the Petitions were granted.
On June 18, 2009, the Supreme Court ruled in favor of the Company, reversing the Second
Circuit’s February 15, 2008 decision, finding, among other things, that the 1986 Orders are final and
generally bar the Statutory and Hawaii actions and substantially all Common Law Claims against TPC.
Further, the Supreme Court ruled that the bankruptcy court had jurisdiction to issue the Clarifying
Order. However, since the Second Circuit had not ruled on certain additional issues, principally related
to procedural matters and the adequacy of notice provided to certain parties, the Supreme Court
remanded the case to the Second Circuit for further proceedings on those specific issues. Accordingly,
the settlements are not yet final. On October 21, 2009, all but one of the objectors to the Clarifying
Order requested that the Second Circuit dismiss their appeal of the order approving the settlement,
and that request was granted. Oral argument on the issues remaining to be considered on remand took
place on October 22, 2009. The parties await a decision from the Second Circuit.
SPC, which is not covered by the Manville bankruptcy court rulings or the settlements described
above, is a party to pending direct action cases in Texas state court asserting common law claims. All
such cases that are still pending and in which SPC has been served are currently on the inactive docket
in Texas state court. If any of those cases becomes active, SPC intends to litigate those cases vigorously.
SPC was previously a defendant in similar direct actions in Ohio state court. Those actions have all
been dismissed following favorable rulings by Ohio trial and appellate courts.
240